Your local TV station may soon have a new owner. Today it was announced that Nextstar Media Group will be buying the Tribune Media Company for $6.4 billion. This deal will add more than 40 stations including KTLA in Los Angeles, WPIX in New York and WGN-TV in Chicago to Nexstar’s list of locals. (Note WGN-TV has been up for sale separately and it at the time of this posting its inclusion is uncertain.)
Perry Sook, Chairman, President and CEO of Nexstar, commented, “Nexstar has long viewed the acquisition of Tribune Media as a strategically, financially and operationally compelling opportunity that brings immediate value to shareholders of both companies. We have thoughtfully structured the transaction in a manner that positions the combined entity to better compete in today’s rapidly transforming industry landscape and better serve the local communities, consumers and businesses where we operate. As with our past transactions, we have developed a comprehensive regulatory compliance plan and believe we have a clear path to closing. With committed financing and a plan for significant synergy realization that will result in only a minimal increase in Nexstar’s pro-forma leverage, the combined entity will be poised for growth, leverage reduction and increased capital returns for shareholders.
“The transaction offers synergies related to the enhanced scale of the combined broadcast and digital media operations, and increases our audience reach by approximately 50%. Furthermore, the addition of the Tribune Media broadcast assets further expands our geographic diversity, as pro forma for the completion of the transaction, we will serve 18 of the nation’s top 25 markets and 37 of the top 50 markets.”
“Financially, the transaction will result in approximately 46% growth in Nexstar’s average annual free cash flow in the 2018/2019 cycle to approximately $900 million, or approximately $19.50 per share, per year based on approximately 46.2 million Nexstar shares outstanding. In the twenty two years since we founded Nexstar, we have demonstrated prudent use of leverage and an ability to source capital at attractive rates to support our strategies for growth and the enhancement of shareholder value. Given our planned divestitures and the significant free cash flow from operations we intend to allocate capital from the combined entity to immediately reduce leverage and increase our return of capital to shareholders, while investing in our business to improve service to viewers and advertisers. This focus, combined with our time proven operating and integration strategies will enable us to extend our strong long-term record of shareholder value creation.”
The deal still needs regulatory approval that could take some time. We will update this story as we learn more.
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